Supply and demand outlook contribute to oil’s weekly loss

SAN FRANCISCO (MarketWatch) — Oil futures saw a minor rebound Friday to reclaim the $93-a-barrel level, but still posted a loss of almost 3% for the week as traders fretted over ample U.S. crude supplies and weak demand prospects.

Crude oil for April delivery
US:CLJ3
rose 29 cents, or 0.3%, to settle at $93.13 a barrel on the New York Mercantile Exchange, recouping part of Thursday’s hefty 2.5% loss.

Tracking the front-month futures contracts, prices lost 2.9% for the week. Last Friday, March crude, which was then the front-month contract, ended at $95.86.

Meanwhile, London-traded April Brent crude
UK:LCOJ3
tacked on 57 cents, or 0.5%, to settle at $114.10 on ICE Futures after plunging by $2.07 Thursday. It saw a loss of 3% for the week.

The Energy Information Administration on Thursday reported a bigger-than-expected rise in the past week’s crude supplies, but also showed that gasoline and distillate stockpiles fell more than expected. Disappointing U.S. manufacturing data also dulled prospects for energy demand. See: Oil falls 2.5%, marks lowest close this year.

“If anything, data points have been slightly bullish to price as seen in significant [supply] draws in gas[oline] and distillates,” Ryan said. But as usual “the market gets explained away on a gap in knowledge by phantom fund liquidation, which very well might end up being the case, but something that can’t be confirmed for weeks.”

The oil market “seems to be trading more on the macroeconomic picture at present more than direct industry data points, but that can only last so long if inventory draws and global economic activity continue to pick up, albeit slightly,” said Ryan.

For now, it looks the prices are just range bound between the $90- to $100-per-barrel number for West Texas Intermediate crude on Nymex, “until there is some significant positive or negative news to jolt the market out of this range,” he said.

The dollar and Fed minutes

Friday’s action came amid a modest rise for the U.S. dollar, with the ICE dollar index
DXY, +0.46%
rising to 81.490 from 81.377 late Thursday in North America.

Strength in the U.S. unit can often weigh on prices of dollar-denominated commodities such as crude oil, as it makes them more expensive to holders of other currencies.

“There’s a decent case for making the U.S. dollar rally on the [Federal Reserve Open Market Committee] minutes the trigger for downdrafts in a number of commodities this week, including the oil market,” said Tim Evans, an energy analyst at Citi Futures, in an email.

Minutes from the FOMC’s January meeting released Wednesday showed that the Fed would consider changes to its ultra-loose monetary policy, a policy which has contributed to a weaker dollar and, in turn, supported dollar-denominated commodities.

But “in terms of the underlying physical fundamentals” in the oil market, the 4.1 million-barrel build in EIA crude stocks for last week “deserves an honorable mention,” Evans said.

Bomb attacks rock Damascus

(3:16)

Dozens of Syrians are killed by multiple explosions in Damascus, with the largest appearing to target offices of the governing Baath Party. Photo: AP

On a technical level, VTB Capital pegs near-term support for WTI crude at the $92.50-$93 level and for Brent at $114, but added “there is more support at $113 in case of a prolonged correction.”

Other energy futures finished higher for the session, though natural gas was the only one to see a weekly gain.

March heating oil
US:HOH3
closed at $3.10 a gallon, up less than a cent, or 0.3%, but losing 3.3% on the week. March gasoline
US:RBH3
closed up 4 cents, or 1.4%, to $3.08 a gallon, down 1.8% from a week ago.

March natural gas
US:NGH13
added 4.5 cents, or 1.4%, to $3.29 per million British thermal units, 4.4% higher for the week.

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